PHOTOS BY AMANDA CASTRO-CRIST / AMARILLO GLOBE-NEWS Xcel Energy workers repair utility poles June 22 near Whitaker Road and Southwest 34th Avenue. Xcel Energy is spending $3.2 billion to improve its infrastructure in Texas and is considering asking the Public Utility Commission for a temporary rate increase to offset some of the associated costs. Check out amarillo.com or tap here for more photos of Xcel crews at work.

Related Links

Xcel Energy plans to double the value of the infrastructure in its Texas/New Mexico service area over the next five years by spending $3.2 billion, but it wants to get that money back faster than current rules allow.

“There could be new owners if we can’t raise capital and put it to work,” Xcel CEO Ben Fowke said of the company’s local subsidiary, Southwestern Public Service. “Investors wonder why we can’t recover costs faster.”

Several states where the utility does business set rates that pay for capital investments like wires, poles, substations and generating plants based on future growth estimates. In Texas, companies have to look back, and it can take years for a rate case to move through the Texas Public Utility Commission.

There is an SPS rate case pending at the PUC to, among several things, recoup capital spending.

The test year for that ran from July 2012 to June 2013, during which SPS spent about $386 million on construction.

“We’ve spent $430 million since then and haven’t started trying to get that back,” said David Hudson, CEO of SPS, which serves the Texas Panhandle, South Plains and eastern New Mexico. “Yet our shareholders had to pay for that. In Texas, you’re using the rearview mirror to drive a car. If you’re going 20 mph and the road is straight you’ll be all right. But we’re going fast in the hills and mountains. Texas is Xcel’s worst-performing jurisdiction.”

In its first quarter earnings report, Xcel said subsidiary Public Service Co. of Colorado earned 24 cents per share compared to SPS’ 4 cents.

Other Xcel utilities include Northern States Power — Minnesota with 21 cents per share in earnings and Northern States Power — Wisconsin with 5 cents.

“Our equity advisors are asking why we’re spending so much money here without the return,” Hudson said. “We want to get closer to current costs with current returns. These same policymakers (Texas legislators) use this. They’re synchronizing their costs with revenues. We think it’s an outcome we need to run a business.”

The existing system has been somewhat acceptable in the past, but spending to meet needs is accelerating, putting more costs on the books and making it take longer to recover them and boost the return to investors.

“We’re projecting earning 6 to 8 percent on equity, and it should be 10 percent,” Hudson said.

So Fowke has assigned Hudson to work with legislators to change the laws governing cost recovery. Hudson has begun conversations with members of the local state legislative delegation.

State Rep. John Smithee, R-Amarillo, calls it a complicated issue that needs close examination.

“My experience is utilities ask for more than they need or expect to get,” he said.

“We have to balance keeping electric rates low and reasonable, but we want to provide a utility the ability to expand to meet needs. My view is we’re going to look at their request very carefully and get technical analysis from third parties, maybe opposing parties. They’ve got investors and goals, and if they can’t raise capital and pay debt, ultimately the area suffers.”

State Sen. Kel Seliger, R-Amarillo, is also open to considering the options.

“Since they’ve simply mentioned it, I’ve thought about it, but we need details,” he said. “We’re a long way from the next session. If they have a proposal, I’ll look at it. We need to see what does this have to do with the cost to ratepayers. They did it with fuel costs, and it didn’t affect the customers. We’ll see when all the interested parties weigh in.”

One change SPS will be asking for is to allow it to implement a partial rate increase while a rate case proceeds with a provision for refunds to customers if the outcome is a smaller increase. Others include allowing the inclusion of construction spending that happens from the end of the test year to the time of the rate case filing and letting utilities file for rate increases for spending more frequently.

“Looking at a transmission cost recovery case, we can file once a year,” Hudson said. In the Electric Reliability Council of Texas that governs the grid covering most of Texas but not the Panhandle, “they can file twice a year. We’d like the same treatment.”

There are a number of issues driving SPS’ spending, including growing demand from irrigators, an expanding population, aging lines and substations, federal mandates to cut air emissions and even the modern phenomenon of computer hacking.

“Protecting the grid gets quasi-military. After the financial industry, we’re the most targeted,” Fowke said. “It does have a price tag.”

Other factors SPS is trying to address include federal requirements for increased reliability through routing power on different routes to the same customers and the general increasing demand from population growth.

“The majority of it is new lines, but we’re also doing some wrecking out and replacing,” Xcel spokesman Wes Reeves said.

The company also expects to need to build more power plants soon.

SPS growth by the numbers

■ $5 billion: Cost to build current infrastructure

■ $3.2 billion: Current infrastructure after depreciation

■ $3.2 billion: Additional infrastructure in next five years

■ $381 million: Rate case for one year’s capital cost recovery

■ $430 million: Capital spending since test year ended June 2013

■ Human expenses: 25 percent of workforce eligible to retire in five years